Acting swiftly, on January 26, 2017, the same day that Miscimarra was appointed, the NLRB’s Office of the General Counsel (“General Counsel”), Division of Operations-Management, distributed to all NLRB Regional Directors, nationwide, Memorandum OM 17-11 (“Memo OM 17-11” or “Memo”), which provides guidance to Regions handling pending cases involving employment arbitration agreements prohibited by Murphy Oil, essentially protecting all active cases under the former Obama administration’s NLRB.

While citing to commitment to “judicial economy and avoiding undue litigation” while awaiting the Supreme Court’s review as the reason for the guidance Memo, the Memo effectively ensures active cases remain subject to the Obama-appointed General Counsel’s militant opposition to such arbitration agreements under its holding in Murphy Oil—before President Trump’s appointees take control.

Memo OM 17-11 provides specific guidance to Regional Directors regarding the handling of the varying scenarios relating to such agreements under Murphy Oil. For instance, in cases where the Regions find merit that an employer is either maintaining and/or enforcing an arbitration agreement prohibited by Murphy Oil, the General Counsel in Memo OM 17-11 directs Regions to propose the parties enter into settlement agreements conditioned on the NLRB prevailing before the Supreme Court.

Perhaps most interesting is the broad phrasing used in Memo OM 17-11; it carefully avoids narrowing the issue taken under review by the Supreme Court as being “whether arbitration agreements that bar employees from pursuing work-related claims on a collective or class basis in any forum violates Section 8(a)(1) of the Act.” Glaringly absent from the issue is the hot topic term mandatory, which instead appears solely in a sentence toward the Memo’s end, which states: “In situations involving opt in/opt out clauses in mandatory arbitration agreements or where it is argued that some other feature of these agreements renders them distinguishable from Murphy Oil, Regions are directed to hold such cases in abeyance.”

On whole, Memo OM 17-11 provides hope for employers. The General Counsel’s Office has, for the moment, temporarily plugged the holes in the Obama Administration Board’s reasoning for its Murphy Oil holding. But it reveals that the General Counsel is aware that there are, indeed, holes worth questioning.

In November 2011, AT&T Mobility Services (“AT&T”) sent via email a Management Arbitration Agreement (“Agreement”) to 24,000 of its employees who were not represented by unions that included a class and collective action waiver. The email made clear employees had the right to opt-out of the Agreement and provided employees instructions on how to do so electronically.

The email’s subject line read: “Action Required: Notice Regarding Arbitration Agreement.” Once the Agreement was electronically opened, the page linked to a button marked “Review Completed,” which when clicked, indicated that an employee had reviewed it. Employees who did not click on the button were sent additional emails until they reviewed and acknowledged the Agreement.

The emails provided each employee with a deadline of February 6, 2012 by which to choose to opt-out of the Agreement and explained that opting out meant the employee was declining “to participate in the arbitration process.” The messages also included assurances that no adverse action would be taken against employees who choose to opt out, provided employees with a hotline number to call should they have any questions and explicitly stated that all employees could still bring claims before administrative agencies.

In June 2013, three employees filed a wage and hour class action in federal district court. AT&T convinced the plaintiffs’ attorney that two of three employees had failed to opt-out of the Agreement and thus were bound to arbitrate their claims on an individual basis. AT&T argued that employees who had not opted out were bound by the Agreement and had waived their right to participate in the class action.

The class action continued in federal court, and the federal district court judge found that only those 175 employees who had opted-out of the Agreement were eligible to participate in the class (and only 20 actually opted to participate).

The two initial plaintiffs who had not opted out of the Agreement proceeded to arbitration with their claims and eventually sought new counsel. Their new attorney filed an unfair labor practice (“ULP”) charge with the NLRB on their behalf, arguing that the Agreement violated their rights under the National Labor Relations Act (“NLRA”) by interfering with their right to participate in a class action, a form of concerted activity. The Board’s Regional Director agreed, issued a Complaint, and the matter proceeded to a hearing before an ALJ.

While the NLRB ALJ conceded that the Agreement “initially was not mandatory” due to the opt-out option, she took issue with what she concluded was an absence of evidence that employees were actually appraised “in layman’s terms, of the ‘real-life’ consequences of the choice they were being asked to make.” On that basis, the ALJ reasoned that once an employee failed to opt-out, there was “no opportunity for an employee to reconsider his or her decision.”

The ALJ held that an employer may not require employees to enter into arbitration and class action waiver agreements—even where the employee voluntarily elects not to opt out—if the agreement includes an irrevocable waiver of the employee’s future rights protected by the NLRA, such as the right to participate in joint, class or collective actions.

As a remedy, the ALJ ordered AT&T to rescind the Agreement, or to revise it to make clear that employees are not required to waive their right to pursue joint, class or collective actions in all forums, arbitral or judicial.

While the ALJ had no problem stating that she was bound by NLRB precedent and the holdings of D.R. Horton and Murphy Oil, she failed to mention that Section 7 of the NLRA also affords employees the right to refrain from—and thus opt out of—collective action. Specifically, while the current Board, and the ALJ here, have conjured a prohibition on class action waivers out the clause of Section 7 which states that employees “shall have the right to…engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…,” each has ignored Section 7’s equally important counterpart which provides that employees “shall also have the right to refrain from any or all such activities….”

Despite the fact that every U.S. Court of Appeals that has been asked to review D.R. Horton and Murphy Oil has outright rejected the NLRB’s extreme holdings concerning class and collective action waivers in arbitration agreements, the Board pushes forward undeterred and continues to adhere to, and ALJ’s continue to follow, the Board’s rationale and holdings articulated in those cases.

The unanimity and absence of any split among the Courts of Appeal makes it all the more likely that the U.S. Supreme Court will eventually address the NLRB’s very aggressive anti-arbitration agreement position. Considering that the NLRB’s view directly conflicts with the Supreme Court’s prior rulings regarding class action waivers in arbitration agreements, it will be interesting to see how the NLRB’s position holds up if and when it ultimately comes under Supreme Court scrutiny.

In the meantime, the area has become increasingly difficult for employers to navigate. Any employer that wishes to adopt an arbitration agreement with its individual employees that provides for some kind of joint, collective, or class action waiver should contact experienced labor counsel to determine the best course of action for the particular employer.

On October 28 a three-member majority of the National Labor Relations Board in Murphy Oil U.S.A., Inc. revisited and reaffirmed its position that employers violate the National Labor Relations Act (the “Act”) by requiring employees covered by the Act (virtually allnonsupervisory and non-managerial employees of most private sector employees, whether unionized or not) to waive, as a condition of their employment, participation in class or collective actions.

As previously reported in an Act Now Advisory, in 2012 the NLRB held in D.R. Horton that the home builder unlawfully interfered with employees’ Section 7 right to engage in concerted activity by requiring them to sign an arbitration agreement prohibiting class or collective claims in any judicial or arbitral forum. As we have also previously reported, however, on December 3, 2013, the Fifth Circuit rejected the NLRB’s position and held that the Act does not prohibit employers from requiring employees to sign class or collective action waivers. The Second Circuit and the Eighth Circuit have likewise rejected the Board’s position.

Notwithstanding having “no illusions” that the Board’s decision would be the “last word on the subject”, in a 59-page decision, it reiterated and endorsed its prior position and addressed its critics head on, including the two lengthy dissents from Members Harry Johnson and Philip Miscimarra.

The Decision

Murphy Oil is the owner and operator of over 1,000 retail fueling stations. Prior to March 6, 2012, Murphy Oil required all job applicants and current employees to execute a “Binding Arbitration Agreement and Waiver of Jury Trial,” which provided in pertinent part that all disputes related to an individual’s employment shall be resolved by binding arbitration and that the parties to the agreement “waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum.” The Charging Party, Sheila Hobson, signed this Agreement when she applied for employment in 2008. Two years later, Hobson filed a collective action pursuant to the Fair Labor Standards Act alleging that Murphy Oil failed to pay her and others for work-related activities performed off the clock. Murphy Oil moved to compel arbitration and to dismiss the FLSA claims based on the plaintiffs having signed the Agreement. Hobson, thereafter, filed an unfair labor practice charge and the NLRB’s General Counsel issued a complaint, alleging that Murphy Oil had violated Section 8(a)(1) of the Act.

At the heart of the dispute between the Board and its critics is the interpretation of Section 7 and 8(a)(1) of the Act as well as the application of the Federal Arbitration Act (“FAA”) and Supreme Court jurisprudence interpreting same.

Section 8(a)(1) of the Act states that it “shall be an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees” in the exercise of their Section 7 rights. Section 7 of the Act states that employees shall have the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection[.]”

The Supreme Court, on the other hand, in CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 673 (2012), held that where there is no specific “contrary congressional command” as to whether a claim can be arbitrated, the FAA “requires the arbitration agreement to be enforced according to its terms.” The CompuCredit decision, however, only addressed the enforcement of an arbitration clause that barred access to courts, not a waiver of class or collection actions. Moreover, the CompuCredit decision was not an employment-related dispute and did not involve the NLRA. Thus, the specific issue at play in D.R. Horton and Murphy Oil remains unaddressed by the Supreme Court.

The Board’s rationale for upholding D.R. Horton is as follows:

(1) Section 7 of the Act grants employees the substantive right to act “concertedly for mutual aid or protection” and mandatory arbitration agreements that bar an employee’s ability to bring join, class, or collective workplace claims restrict this substantive right.

(2) The conclusion that mandatory class action waivers are unlawful under the Act does not conflict with the FAA or its underlying policies because:

(a) such a finding treats arbitration agreements no less favorably than any other private contract that conflicts with federal law;

(b) Section 7 rights are substantive, which means that they cannot be waived under the FAA like procedural rights found in other statutes;

(c) the “savings clause” in the FAA affirmatively provides that an arbitration agreement’s conflict with federal law is grounds for invalidating an agreement;

(d) if there is a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act – which prevents private agreements that are inconsistent with the statutory policy of protecting employees’ rights to engage in concerted activity – requires the FAA to yield to the NLRA as necessary to accommodate Section 7 rights.

The Board criticized the Fifth Circuit’s decision for, among other things, giving too little weight to the “crucial point” that “the Board, like the courts, must carefully accommodate both the NLRA and the FAA” and not treat the FAA and its policies as “sweeping far more broadly than the statute or the Supreme Court’s decisions warrant.”

As to Member Johnson’s argument in his dissent that “there was no such thing as a class or collective action in any modern sense when the Act was passed in 1935” the Board majority found this point to be irrelevant because the language of “Section 7 is general and broad.” As an example, the Board stated that the pursuit of unionization is “obviously protected” through the use of “modern communication technologies such as social media . . . regardless of whether workers during the Depression had access to Facebook.”

The Board also stated that contrary to the suggestion in Member Miscimarra’s dissent, it has not taken the position that the Act creates a guarantee to class certification or the equivalent; it does, however, create a right to “pursue joint, class or collective claims if and as available, without the interference of an employer-imposed restraint.”

What Does This Mean for Employers

After Murphy Oil, it is clear that the Board’s position and the position of at least some federal courts on this issue remain at odds. If employers require employees covered by the Act to sign class action waivers, they should be aware that it could take significant time and money to ultimately have such an agreement upheld in federal court. Clearly the last word on this issue will come only when the Supreme Court, as it is likely to do, considers the issue. Until then employers that require such waivers should recognize that challenges through unfair labor practice charges will remain a fact of life.